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Thursday, June 02, 2005

A birthday wish for SBI (Business Line)

A birthday wish for SBI

(Business Line)

P. Devarajan

IN the banking industry an SBI official commands a premium, being a stride ahead of the crowd. Despite ICICI Bank, SBI and its seven associates continue to be a lap ahead of the pack, having been vetted in the virtues and vices of over 200 years of existence in banking.

SBI, LIC and the Indian Railways are the three familiar corporate logos enjoying prime place in every district of India and every family album. Going by its birth certificate, SBI's British origins can be put down to June 2, 1806 and on June 4, 2005 the Prime Minister, Dr Manmohan Singh, will be the guest of honour at the birthday bash in Mumbai.

For the Prime Minister, SBI should be familiar, having presided over it as the RBI Governor and its majority owner and as the Finance Minister.

SBI is also the banking face of the country abroad, having raised a few billion dollars in tough times from international markets. One is not sure whether on June 4 the speakers will remember Raj Kumar Talwar, who started as a probationary officer in SBI in late 1943 at Lahore to become SBI Chairman at 47; he was sacked in 1976 at 54.

If SBI is what it is today, the kudos goes to Talwar, according to bankers including those inside SBI. Most new private banks started with an SBI official as Chairman.

Talwar put in place systems which still work and that without the services of any foreign consultant. SBI dropped the habit sometime ago when it picked up a foreign consultant to write its fate. Foreign consultants know little about Indian banking practices and recycle banking jargon picked up from bankers.

But Raj Kumar Talwar was different, leading from the front and not from air-conditioned offices. When M.J. Pherwani took over as Chairman of UTI, Talwar sent a hand-written note to him that said, "Manohar, in all your career, please cling to the truth, no matter what happens to you."

In the book, R.K. Talwar, Tributes, edited by S.A. Dave and N. Vaghul , Vaghul writes: "Not many before, nor any after him, were capable of showing such immense moral courage."

From Talwar's days to June 4, 2005, SBI has grown measured by the number norms of accountants. But do the numbers carry quality? That's debatable. Over the last 15 years, SBI has not had a Chairman with a five-year term to locally and globally position the bank.

Over the years, Deputy Managing Directors and Managing Directors have come and gone, faster than tigers at Sarsika . Mostly it is not ability but boring seniority that pitchforks officials to the top, with the board having little say.

"In that respect it is a bit like the RBI," says a banker, though the RBI will dislike the comparison. SBI, like others, does not believe in building expertise. Transfers are mandatory; an official in the treasury gets transferred to the loan section or some other after a five-year stint, learning little.

In the last couple of years, SBI has forayed into retail loans and treasury profits, like every other player in the industry. But it has not used its financial strengths to grab the lead in farm or SSI lending.

It does abide by priority sector norms but that's not the same as making the critical difference in the lives of the poor and landless farmers. With its reach, SBI could have by now touched the lives of the farming community. The passion has been missing. The bank cannot say that farm lending is unviable, as every working group has said the opposite.

The SSI sector has not been a favoured client as the books turn NPAs, but is that worse than funding Dabhol (was it mandated?) and then providing for the losses from profits?

In fact, the players in the banking industry have been battling each other for 5-star clients alone and SBI has just been an important player. With technology any loan application should not take more than a week, but is that the case with SBI with its massive database? If farm lending continues to be a no-no for banks, India will not grow at seven per cent or eight per cent. That's for sure.

For SBI to be an effective intermediary, the RBI has to shed at least 24 per cent of its 56 per cent equity stake in favour of the public. SBI has mostly been used by New Delhi and the RBI to underwrite their ideas. SBI is not an independent entity and there is little chance of it being so when the birthday party starts on June 4.